Treasury Tinkers With Payment Account Transparency

When the UK government finally acted to improve transparency in retail banking fees and charges, it sparked a similar effort in Brussels that the UK negotiated to align with its own initiatives. This resulted in the Payment Accounts Directive which the UK implemented via the Payment Accounts Regulations 2015 (PARs). Unfortunately (as the FCA later pointed out) the Treasury 'gold-plated' the implementation, by simply cutting and pasting the Directive. The EU was due to review the Directive in 2019, though that is yet to complete. Meanwhile, the Treasury completed its own review in 2021. Struggling to find any 'Brexit benefits', the Treasury has come up with the wheeze of timing its consultation on how payment account fees are presented to consumers with the political gestures announced by the Chancellor today as some kind of post-Brexit renaissance for Britain's financial services industry, now starved of access to its biggest market. You have until 23 February to have your say on these particular changes [yawns].

Among other things required by the PARs, payment service providers must: 

• provide customers with a fee information document that sets out the fees associated with the payment account in a specific form (FID);
• provide each customer with a statements of fees incurred on the payment account in a given period (SoFs) in a specific form; 
• inform customers of whether it is possible to purchase a payment account separately, where it's offered as part of a package, and provide the consumer with separate information regarding the costs and fees associated with each of the other products in the package.

The Money and Pensions Service (MaPS) is also required to provide consumers with access to a website comparing fees charged by payment service providers (I challenge you to find this!).

The Treasury now wants to know your thoughts on the following questions:

Question 1 Do you consider the requirement for payment service providers to provide consumers with FIDs to have any positive impacts (e.g. supporting transparency and comparability of fee information related to payment accounts)?  

Question 2 Do you consider the requirement for payment service providers to provide consumers with FIDs to have any negative impacts (e.g. admin costs or duplication of information already provided)?  

Question 3 Do you consider the requirement for payment service providers to provide consumers with SoFs to have any positive impacts (e.g. supporting transparency and comparability of fee information)? 

Question 4 Do you consider the requirement for payment service providers to provide consumers with SOFs to have any negative impacts (e.g. administration costs or duplication of information already provided)?  

Question 5 Do you consider the presentational requirements (under Schedules 1 and 2 of the PARs) to be necessary? Could consumers be provided with the same or equivalent information by simpler or alternative means?  

Question 6 Do you consider the requirements for the FCA to maintain a linked services list, and for payment service providers to provide customers with a glossary of related definitions, to have any positive impacts (towards supporting transparency and comparability of fee information)? 

Question 7 Do you consider the requirement for the FCA to maintain a linked services list, and for payment service providers to provide customers with a glossary of related definitions, to have any negative impacts?  

Question 8 Do you consider the requirements for the Money and Pensions Service (MaPS) to provide consumers with access to a website comparing fees charges by payment service providers to have any positive impacts towards supporting transparency and comparability of fee information beyond private sector providers? Or could the same objectives be fulfilled without these specific requirements? 

Question 9 Where relevant, what are the costs to your organisation of adhering to Part 2 and Schedules 1 and 2 of the PARs?  

Question 10 Can you foresee any potential unintended consequences or negative impacts of removing any requirements under Part 2 and Schedules 1 and 2 of the PARs? 

Question 11 Do you have any other views on Part 2 and Schedules 1 and 2 of the PARs that you wish to share?

Are Your Payment Accounts Caught By The Payment Accounts Regulations?

If you offer any type of "payment account" covered by the Payment Services Regulations, then the time has come to assess whether any of those fall within the scope of the Payment Accounts Regulations 2015 (“PARs”). From 18 September 2016, affected accounts will be covered by provisions relating to switching; accounts with basic features; and packaged accounts.

In its recent consultation paper, the FCA has said it expects firms to:

• make (and record) an initial assessment of the potential application of the PARs;

• put processes in place to make ongoing assessments for every new account introduced or changes to the functionalities of accounts are introduced; and

• revisit the issue regularly in case consumers are using the accounts differently or any other relevant factors change.

Unfortunately this is not an easy process. In particular, not all “payment accounts” under the Payment Services Regulations (which include e-money accounts) will necessarily fall within the scope of the PARs, as the definitions are different. This has caused uncertainty as to the scope of the PARs which the FCA has tried to put  right in the consultation paper (see Appendix 2).

The FCA has also offered guidance on what constitutes "packaged accounts" and what information must be given to consumers in relation to those under regulation 13 of the PARs (see Appendix 3).

Payment accounts providers must either participate in a designated switching service or provide one that meets certain minimum requirements in the PARs. There is a separate consultation by the Payment Services Regulator on the designation and monitoring of alternative switching services.

And finally, a little something for those preoccupied by Brexit.

As mentioned in July 2015, the PARs import the provisions of the EU Payment Accounts Directive ("PAD") but, as the FCA has stressed in its consultation paper, the UK created its own complexity and red tape in this scenario - choosing to 'gold-plate' EU law by copying it into UK laws that are interpreted literally, rather than reflecting the purposive interpretation that civil law member states adopt:

"In line with the Government’s default approach to implementing EU directives, the provisions of PAD have been copied out into the regulations as far as this is possible.... " (at para 1.12)

Whichever side of the Brexit debate you're on, if any, it's worth realising that Brussels is not always to blame!

More Sunlight On #Payment Accounts

The Payments Account Directive (PAD) must be implemented in the UK by 18 September 2016, and the Treasury is consulting on how to do it. You have until 3 August to respond. This post explains the key features of PAD and the likely UK impact, according to the Treasury.

Key Features of PAD

Perhaps the most important feature of PAD is that payment accounts with certain basic features must be made available by banks to all consumers, including the homeless and asylum seekers, within 10 business days after receiving a complete application. Only banks will have to participate in that scheme, rather than other types of payment service providers (PSPs), like payment institutions and e-money institutions (the privileges and state guarantees enjoyed by banks must come at a price, after all). Such 'basic bank accounts' should be free of charge, or subject only to a reasonable fee, taking into account certain criteria, and there will be limits on termination.

PAD will also target the top 10 to 20 types of fee-based services commonly used by consumers in connection with a payment account or current account, and which generate the highest cost. The authorities have to provide that list to the European Commission and the European Banking Authority a year in advance, so they can specify technical and terminology standards in time for implementation by member states. That 'hit list' will be updated every four years.

The idea is we will each get a 'fee information document' in various forms before we sign up to a payment account or current account, as well as an annual statement of fees. We must also be able to refuse any 'packaged' features (like insurance), or get them separately, if we wish.

Member states have to ensure that at least one comparison website compares the fees for the top 10 to 20 types of fee-based services. There are rules to keep the comparison websites honest.

A 'switching service' must enable the prompt transfer between PSPs of information about all or some standing orders, recurring direct debits and incoming credit transfers, and of any positive balances from one payment account to the other, without necessarily closing the first payment account. The information must be available free of charge; and any other related fees that are charged must be "reasonable and in line with the actual costs" of the relevant PSP (except in cases of abnormal and unforeseeable circumstances beyond the control of the PSP, the consequences of which would have been unavoidable despite all efforts to the contrary, or where a PSP is complying with a statutory obligation). Any financial losses incurred by consumers due to switching must be refunded by the PSP without delay.

Similarly, PSPs must facilitate cross-border account opening, which will be interesting to see in action.

The Commission must report on the application of PAD and any proposals for improvements by 18 September 2019.

UK impact

The Treasury reckons about 50 firms are covered by PAD, and while some of the requirements are covered by existing UK initiatives, those firms are facing significant costs associated with standardising product descriptions and statements. The PAD requirements for basic bank accounts also go beyond the UK banks' voluntary bank programme (of course), so regulation is required. Only the UK's Money Advice Service will be expected to act as a comparison site. The 'current account switching service' covers most payment accounts likely to be affected, and PSPs who are not members of it will have to provide their own equivalent that meets the PAD requirements.